Imagine being able to attend college (in America) without paying any tuition, and without taking out any student loans. You would probably laugh and say something like, “Yeah, sure, that’d be nice, but can we get back to reality now?” Up until last week, that certainly would have been my response. I mean, let’s be serious; in this country, if you want to attend a decent, four-year institution of higher learning, you either go on a scholarship, you pay the tuition (or your family pays), or you take out student loans. That’s just how it works.
But remarkably, that might be changing. The great state of Oregon just passed revolutionary legislation that would allow students to attend public university in the state without paying tuition and without going into debt. In exchange, students would deduct 3% of their post-graduation paychecks for twenty-five years, which would be paid to the state university system.
If this sounds kind of like Income-Based Repayment (IBR) or Pay As You Earn (PAYE), you’re sort of right. It’s a similar concept. However, IBR requires a monthly payment of 15% of discretionary income, and PAYE requires 10%. Furthermore, IBR and PAYE are repayment plans for loans. If you miss payments or go into default, there are very serious consequences. Pay It Forward, on the other hand, is more like a modest payroll tax, and it is dependent on your paycheck. If you graduate with no job or a low-paying job, you’ll pay nothing, or next to nothing. If you do well after college, a 3% payroll deduction isn’t exactly going to kill you. Most importantly, it is not a loan.
The program will, of course, have challenges. Most notably, the state has to come up with a plan to fund the first several classes of students who would use the program, since the future payments of graduates will be used to fund the then-current crop of students (the program won’t go into effect until at least 2015). In addition, there is simply no other program like this in the country, so no one knows if this will actually work. The program is built entirely on estimates and statistical modeling.
But this is a remarkable experiment and could very well be a key component of comprehensive student loan reform in this country. Other states are paying attention and have expressed an interest in similar programs. Everyone is watching Oregon to see how this turns out. Stay tuned, this is big.
To read more about the Pay It Forward program, click here and here.